| NEW YORK/HOUSTON
NEW YORK/HOUSTON Oil company ConocoPhillips and
meat producer Tyson Foods Inc. plan to work together to produce
biodiesel from animal fat, the companies said on Monday.
Beef, pork and chicken fat from Tyson rendering plants will
be processed at ConocoPhillips refineries to create
ConocoPhillips, the third-largest U.S. oil company, said it
plans to spend about $100 million over a 3 year to 5 year
period to prepare several refineries to process the fuel. It
said the diesel will first be produced at its Borger, Texas,
Tyson, the world's largest chicken, beef and pork
processor, said it will make capital improvements this summer
at some of its rendering plants so it can start pre-processing
The companies expect production from the project will ramp
up over time to as much as 175 million gallons per year of
Tyson said production is expected to start late in 2007 and
ramp up through spring 2009. At full production, Tyson expects
annual earnings of 4 cents to 16 cents a share from the
"We are firmly committed to leveraging our leadership
position in the food industry to identify and commercialize
renewable energy opportunities," said Tyson Chief Executive
Richard Bond in a statement.
ConocoPhillips and Tyson will be taking advantage of a $1
per gallon tax credit that will make the fuel cost effective,
"It's not profitable without the $1 per gallon tax credit,"
ConocoPhillips CEO James Mulva said at a news conference. "With
the tax break, it's barely commercial."
Mulva said the project would have no real impact on his
company's financial results.
The tax credit is set to expire in 2008, but both companies
are hopeful it will be extended.
Early this year, U.S. President George W. Bush called for
increased use of renewable fuels to reduce reliance on oil from
the Middle East.
Energy companies have come under pressure from
environmentalists to increase production of renewable fuels.
In 2006, U.S. biodiesel makers produced between 225 million
and 250 million gallons, or less than 6 million barrels, of the
fuel, according to the National Biodiesel Board. That compared
with an overall on-road diesel market of about 38 billion
barrels, the board said.
Only a very small percentage of the biodiesel currently
produced in the United States comes from animal fat. The main
feedstock currently used to make biodiesel is soybean oil.
ConocoPhillips and Tyson said the fats will be processed
with hydrocarbon feedstocks to produce a high-quality diesel
fuel that meets all federal standards for ultra-low-sulfur
They said that, unlike ethanol, the fuel can be transported
ConocoPhillips already produces biodiesel from soybeans at
its Whitegate refinery in Cork, Ireland.
Tyson, which formed a renewable energy unit late last year,
has said it has access to about 2.3 billion pounds of animal
fat annually -- the equivalent 20,000 barrels a day of
feedstock that can be turned into renewable fuel.
Tyson said the venture will use more than half of the fat
that it currently sells as a commodity.